Davos: Business Leaders Focus on 5 Sustainability Themes

Posted by: Peter Lacy on January 29, 2010

As I write from the World Economic Forum, having attended an event with some of the UN leadership and CEOs from various sectors, I’m further reminded of the growing prominence of sustainability issues in both core business strategy and mainstream geo-politics. This was was barely thinkable even five years ago.

The event today was organized by the United Nations Global Compact, a vehicle set up by Kofi Annan to work with the private sector on the UN’s sustainable-development goals, launched here at Davos in 2000. As the Compact celebrates its 10th Anniversary both the UN leadership and business leaders were reflecting on progress to date, the challenges and opportunities ahead, and in particular the leadership that will be required to live up to what Secretary General Ban-Ki Moon has called the "Compact 2.0" in the next decade.

The debate was a fascinating and wide-ranging one. It was also a debate that went way beyond climate change to encompass a broad set of environmental, social, and governance issues. On the one hand the tone was a somber and challenging one. Jeffrey Sachs of the Earth Institute at Columbia University called upon business leaders to go beyond pure self-interest and act as “global statesmen” as they look to reshape the world in the wake of the global financial crisis. “We need to be honest about the fact we nearly blew up the global economy," he said. "Now it isn’t about only regulation or self-regulation. We need business leaders that can go beyond their own interests and act as `global statesmen' in building a sound global system.”

But on the other hand business leaders generally felt that significant progress had been made and their commitment remains firm to responsible and sustainable business. Although they clearly felt the downturn has had a significant impact on their activities and ability to invest due to a need to just survive, the economic context has forced them to align sustainability with core business objectives where they can have the largest impact.

There was also a sense that business needs to really focus on what it does when it is at its best: deliver wealth creation and economic returns for shareholders and stakeholders, sustainably and responsibly.

This was a timely discussion at Davos because this year Accenture (my employer) is leading the UN Global Compact CEO study to help understand business leader attitudes on sustainability. I jointly led the interviews back in 2007 for McKinsey so I’m looking forward to seeing how opinion has evolved. The results of our study will be presented in June at the UN Leaders Summit in New York. But for now, based on what I have gleaned from my own client discussions and from Davos I see five key themes emerging amongs CEOs across industries and geographies:

1. Stability: Business leaders across sectors and geographies are concerned that the global economic situation is putting capitalism and a commitment to free markets themselves at question. They fear a resurgence of populist measures and protectionism that could act as a brake to global recovery and growth. They feel the urgent need for business leaders and the UN to restate the positive role that companies can play in generating wealth and to redouble the efforts to do that in a way that contributes to sustainable development outcomes, verifiably.

So it isn’t good enough just to make the "business case" for sustainability but also at a much more fundamental level, "making the case for business."

2. Regulation: The business leaders I have spoken to fear that we are going to see a wave of regulatory activism and interventionism. They fear that the pendulum could swing too far. Generally they are not against regulation per se--in fact many see the need for a re-calibration in financial markets in particular--just not knee-jerk reactions. More commonly they want to seriously explore collaborative solutions such as self-regulation and multistakeholder engagement. I see more interest in creative and innovative solutions here that are truly about demonstrating verifiable outcomes and building trust.

3. Limits: The downturn has forced business leaders to stick to what one CEO called the "hierarchy of needs" just to survive. But the ramifications of instability go further. CEOs feel the need to restate the core purpose and benefit of business as an engine of economic growth. They also believe there are genuine limits to responsible business if it doesn’t align with core business objectives, as well as recognizing the need to work with other players who may be better placed to deliver impact around education, health, climate change, etc., such as development agencies and NGOs.

There is also a hint of "backlash" against pressure groups, who some feel are quick to chastise but slow to publicly recognize progress, particularly given scarce financial and management resources (e.g. sometimes even taking a leadership position on sustainability ends up with being damned if you do, damned if you don’t).

4. Markets: There is a strong sense from CEOs that they see sustainability issues becoming increasingly relevant to market forces, particularly as consumer and customer demand grows not just for sustainable performance (where there are still doubts about whether consumers and customers are prepared to pay a premium) but also products and services whose core proposition is about tackling sustainability challenges in areas like energy, water and waste.

Nowhere is this more evident than in the wide range of discussions that have been going on at Davos around Intelligent Cities and SMART technologies in everything from energy grid technologies to SMART transport and logistics.

5. Execution: Business leaders seem again and again to recognize that "Execution, Execution, Execution" is the name of the game. They increasingly understand sustainability trends and how they are likely to impact their industry. In many cases they have a good strategic vision for where they want to get to, both in terms of the way they run their business and in terms of embedding sustainability in their product and service mix.

However, where they are struggling is executing across the organisation. This is in areas ranging from supply chain to performance management, from new business development to building the organisational and individual capabilities to align sustainability with revenue growth, cost reduction, risk management or brand and reputation. So delivery and implementation are already a big theme and don’t appear to be going anywhere.

So as both political and business leaders at Davos “Rethink, Redesign, Rebuild” their way to improving the world, it is clear that sustainability is here to stay as a top table agenda item and is becoming an increasingly embedded part of geo-politics and what it means to be a high performance business.

Peter Lacy, based in London, is Managing Director of Accenture Sustainability Services in Europe, Africa and Latin America. He is blogging from the World Economic Forum in Davos this week.

Reader Comments

Steve Burt

January 30, 2010 2:19 PM

Peter may we speak, please see www.eq2.eu.com since we are working with a number of FTSE companies.

Steve Burt

Maxwell Pinto

January 30, 2010 3:16 PM

Excellent article...some thoughts on leadership:

Leadership is the art of mobilizing others toward shared aspirations. In a business enterprise, leaders must take care of employees who, in turn, are responsible for taking care of customers, stakeholders, and related outside parties, such as the government and the community, in an ethical manner. This approach also considers implications for the environment and results in profitable growth combined with an increase in the welfare of all parties involved.

Great leaders are visionaries whose intuition helps them to recognize and capitalize on business opportunities in a timely manner. Their success is based on surrounding themselves with “like-minded” professionals who complement them to help reinforce their strengths and eliminate their weaknesses. They build teams consisting of individuals who complement one another in a way that ensures consistent performance in line with corporate goals. The mantra embodied herein is “Build grand castles in the air while ensuring that they rest on solid foundations.” This is in direct contrast to mediocre leaders who surround themselves with yes-people who, by their very nature, are unable to contribute positively to the bottom line!

The wisdom of effective leaders enables them to appreciate the views of their inner circle and others. In situations where consensus cannot be reached, they have an uncanny ability to cut to the chase and make informed decisions. They foster an environment that encourages the sharing of ideas through brainstorming while realizing that innovation need not be preceded by the existence of committees.

True leaders place a great deal of emphasis on culture and shared values.
They realize that business involves human beings and that profitable growth results from fruitful relationships. They normally possess both formal and informal power. Formal power is entrusted to them by virtue of their position in the company. Informal power results from their core belief system. They lead by example, thus earning the respect and admiration of their peers and subordinates. As a result, employees are enthusiastic about going beyond the call of duty for “their” leaders.

Great leaders build organizations that are vibrant and performance driven. They structure employee compensation packages in a way that promotes and reinforces the right behaviors and rewards people on the basis of individual as well as team performance. They believe that a base salary pays the bills, whereas variable compensation, including earnings before interest, taxes, dividends and amortization (EBITDA)-based bonuses, motivates employees to challenge themselves and increase their contribution to the firm on a consistent basis. These leaders find reasons to pay bonuses as opposed to those leaders who find reasons to deprive employees of bonuses they truly deserve! They realize that there is enough in this world for everyone’s need, though not for everyone’s greed, as mentioned by the late Mahatma Gandhi.

Leadership traits can create a virtuous cycle for the firm’s management, employees, clients, stakeholders, and others. Great leaders have a natural flair. There are those who believe that their effectiveness can be increased through education, other methods of training and development, and experience, though to a limited extent.

Ethical leadership calls for morals, fairness, caring, sharing, no false promises or unreasonable demands on others, etc. Is “ethical leadership” an oxymoron?

I have a policy of distributing free abridged versions of my books on leadership, ethics, teamwork, motivation, women, bullying and sexual harassment, trade unions, business law, etc., to anyone who sends a request to crespin79@hotmail.com.

Maxwell Pinto, Business Author
http://www.strategicbookpublishing.com/Management-TidbitsForTheNewMillenium.html

Jennifer Rai

January 31, 2010 5:37 PM

Very well written article!

Asian

February 1, 2010 1:00 AM

I hope Europeans should keep quiet at least for current year about all noise they are creating (with bad intentions) about GLOBAL WARMING. I hope the amount of snow they got on their a**, should bring forward some honesty in them. I love seeing them ducked in their homes and slipped to break their bones from ice sheets. Hope we will hear less useless noise about global warming. tnks.

Olivier

February 1, 2010 1:40 PM

Very interesting article. Besides sustainability I think 'definition and alignment to the business objectives' is also one of the key challenges most of the companies will have to work on. Sustainability can indeed only be achieved as a last step to a long and demanding process starting from the very top of the company. Only if those business objectives are properly cascaded will the CEO be in a position to reflect on the sustainability of his/her organisation.

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